Spring 2015 – Briefly Noted

Seafaring savior. A long-lost battleship. Enabling a book thief. Philanthropy vs. charity. Why give operating support?

Stepping into a Breach

In mid-February over 300 African migrants attempting to enter Europe drowned in the Mediterranean Sea when the inflatable dinghies they had been packed into by unscrupulous smugglers were sunk in winter storms.

Sadly, this happens all the time. The United Nations High Commission on Refugees estimates that in 2014, 3,500 undocumented migrants died trying to cross the Mediterranean in less-than-seaworthy vessels. After a drowning of 366 people off the coast of Lampedusa in 2013, Italy set up a specialized search and rescue operation called Mare Nostrum. Last year, over 200,000 people were rescued in the Mediterranean, many by the Mare Nostrum operation. But in October the Italian government halted Mare Nostrum amid controversy over whether scooping up illegal migrants in leaky boats and landing them on Italian soil to begin an extended asylum process provides incentives for smugglers to continue their sinister trade.

Christopher Catrambone is an American who relocated to the Mediterranean after his home was destroyed by Hurricane Katrina in order to build a business specializing in high-risk insurance, emergency assistance, and intelligence in combat zones. While on vacation in 2013, an empty jacket floated onto his peaceful beach, which he realized must have belonged to one of the dead from Lampedusa. He decided to take matters into his own hands.


A private rescue mission keeps Mediterranean migrants from drowning. (moas.eu)

“No one deserves to die at sea,” he wrote. “When I saw what was happening to people crossing the Mediterranean, I knew I had to do something.” He and his wife gave almost half of their personal wealth to equip a rescue boat with drones, medical supplies, and personnel trained to respond quickly to calls of distress at sea. The humanitarian effort is known as MOAS, for Migrant Offshore Aid Station. In 2014, MOAS rescued 3,000 migrants in distress. Those picked up are handed off to Italian or Maltese authorities, who decide the best course of action. Some are granted asylum, others are repatriated.

In the midst of worldwide migratory pressures and shifting political ground, Catrambone’s effort is yet another demonstration that there is hardly any sector that is outside the scope of philanthropy, not even international search and rescue. While Europeans make hard decisions about the best ways to police and protect their waters, a private citizen from Louisiana is reducing the number of empty jackets, dresses, and baby blankets washing up on tourist beaches.

Deep Exploration

Another philanthropist engaged in recovery missions on the high seas is Microsoft co-founder Paul Allen. He recently announced that after eight years of searching he has discovered the long-lost Japanese battleship Musashi. Among the most powerful vessels of its class ever constructed, the Musashi was sunk by American forces during the Battle of Leyte Gulf, after an estimated 36 torpedo and bomb hits from carrier-based airplanes. She disappeared without a trace into the Sibuyan Sea, along with nearly half her crew of 2,400 men.


The battleship Musashi lay in secret at the bottom of the ocean—until now. (Paul Allen)

Allen and his team used extensive detective work and an arsenal of high-tech gadgets aboard his 414-foot ship Octopus to locate the wreck that has evaded discovery for decades, including a remotely operated vehicle that captured images of the remains. The discovery of the lost battleship is just the latest scientific accomplishment of Allen’s Octopus. The vessel has been used by the Royal Navy to explore the wrecked HMS Hood, by Discovery Science Channel to capture documentary footage, and by James Cameron on his historic mission to the bottom of the Marianas Trench, the deepest point on earth at nearly seven miles below sea level. Octopus has also been deployed in rescue missions.

As the final resting place for thousands of men, Allen and his team will work with Japanese and Philippine authorities to ensure that the Musashi wreck is treated with proper respect.   —Jarom McDonald

The Book Thief

Olly Neal, a dirt-poor student at a segregated school in the 1950s, was a troublemaker. He cursed authority. He stole from stores. His English teacher saw that his rebelliousness masked real intelligence and energy, and she tried to reach out to him, but he mocked her until she cried.

One day Neal spotted a book with a provocative cover and slipped it into his jacket. Reading it at home in secret, he couldn’t put it down. When he next visited the library he found another title by the same author on the shelf, and stole that one too. Returning again, he was surprised to find a third volume he hadn’t noticed before, and later a fourth. Soon he branched out into all other kinds of reading, and found himself headed to college and then law school. He became Arkansas’s first black district prosecuting attorney, and was ultimately appointed an appellate-court judge.

At a high-school reunion, Neal got to chatting with Mildred Grady, the teacher he had reduced to tears, and told her how he stole those books and how much they had meant to him. She disclosed a secret of her own: She saw him take the first one and let him get away with it, intuiting that he didn’t want to tarnish his bad-boy image by being seen checking out a book. And she went in search of more titles that might interest him, driving throughout Arkansas and Tennessee to buy them (in the days long before Barnes & Noble or Amazon) and sneaking them onto the shelf week after week. Her mercy and gifts of time and resources opened a world to Olly Neal, and literally transformed his life. Their story is told in A Path Appears by Nicholas Kristof and Sheryl WuDunn, who write on more pecuniary aspects of philanthropy later in this issue.

From Systems to Service

As founding CEO of the Bill & Melinda Gates Foundation, Patty Stonesifer directed grantmaking of more than $1 billion per year. This was after her mega-career at Microsoft, “building software that would reach around the world.” In both business and philanthropy, Stonesifer spent her first three decades of employment working at a very grand and abstract “systems level.”

But having grown up with eight siblings, and Catholic parents who took her on regular service missions, Stonesifer realized she missed the joys and discoveries of working at a more intimate level. So she walked away from big bureaucracies and took a job as head of Martha’s Table, a D.C. nonprofit that counts its employees in the dozens, and feeds low-income children and adults, encourages early education, and runs thrift stores to supply basic needs and help fund other programs. The group gets 86 percent of its income from private sources.


A girl helps herself to fresh vegetables from Martha’s Table. (Tyrone Turner)

The bird’s-eye view of high-level philanthropy “often keeps you away from understanding, what are the rocks in the pockets of those you serve?” said Stonesifer at the final event of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal. Moving from big philanthropy to directly helping people represented a return to her Catholic service roots and to traditional charity, and she reported that “over my first year at Martha’s Table I have worked harder—and happier—than in any of my 57 years before.”

A transcript of this event, and others from the Bradley Center’s 12 years of presentations under the direction of Philanthropy contributing editor William Schambra, are available at Hudson’s website.

Leader Discussion:

How Important Is General Operating Support to Charities?

One of the big decisions a donor must make is whether to fund a nonprofit’s general operations or only specific programs. The latter, much more restricted, form of grantmaking is currently far more popular. Yet some donors believe that unrestricted gifts are the most valuable support that a truly excellent charity can be given.

Here, philanthropy executives Peter Bird (Frist Foundation), Wendy Garen (Ralph M. Parsons Foundation) and Donn Weinberg (Harry and Jeanette Weinberg Foundation) discuss when circumstances may favor focused versus unrestricted support. Lynn Thoman, co-chair of the Leon Lowenstein Foundation, led this discussion at The Philanthropy Roundtable’s latest Annual Meeting.

Thoman: Imagine that you’re an entrepreneur and you’re starting a chain of burger restaurants. You meet a potential funder who is very enthusiastic, and then he says, “Well, I’ll support your hamburgers but not your cheeseburgers. And I’ll support your juice drinks but not your sodas. And I’ll give you funding for two years and you have to spend X percent in year one, Y percent in year two. And I love your idea of opening another restaurant but I’ll only fund you if you open it in this part of the city and not in that part of the city.” That’s what we’re talking about here—general operating support versus restricted or program funding.

We have a great group of foundation leaders. The Frist Foundation makes about $10 million of grants per year, mostly in Nashville. The Parsons Foundation distributes about $20 million a year, the bulk going to human services in Los Angeles. The Weinberg Foundation, a $2 billion entity that gives away $100 million a year, helps people on the lower end of the economic spectrum—the elderly poor, persons who need jobs, the disabled, the homeless—and also does about 25 percent of its grantmaking in Israel and the former Soviet Union.

Do your foundations provide general operating support? Why or why not?

Weinberg: About 30 percent of our grants are for general operating support. But sometimes that’s an artificial distinction, because our program grants often have overhead proportionately reflected in their budget.

Garen: The reverse can also be true. I have a colleague who runs a foundation, and if they give a vehicle to a nonprofit, they absolutely will not consider funding the driver, the insurance, the gas. Where is that money supposed to come from? The problem is not always on the donor’s end; sometimes grantees are not in touch with the true costs of a program.

We became much more comfortable with unrestricted operating support after the crash of 2008. While our own assets plummeted, the meltdown among nonprofits was even worse. Nationally, the Nonprofit Finance Fund has found that 55 percent of nonprofits have less than 90 days of reserves and 22 percent have just one month of reserves or less. It’s difficult for these fragile charities to innovate because they’re worried about payroll. They’re scrambling to stay open. In that context, unrestricted support can be really helpful.

Thoman: When you say unrestricted, can the organization use it for anything?

Garen: I mean really unrestricted. We’ve begun making grants, sometimes on a matching basis, even to help build reserves. We know great nonprofits need long-term working capital, direct program expenses, and administrative and operating support. I think Jim Collins summed it up best when he said that “to make the greatest impact on society requires first and foremost a great organization, not a great single program.”

Bird: Our foundation gives about $10 million a year, and about 55 percent of that is general operating support. Most of it goes to sustain a visual arts center in downtown Nashville that we started and we trust. That’s what unrestricted giving says. We trust them.

When our foundation began we surveyed the landscape and saw a lot of things that were missing in Nashville: a community foundation, a volunteer center, management consulting for nonprofits. So we launched all those things. And our board felt very strongly that if we started something, we had a permanent responsibility to help sustain it. Other donors have joined in—in cases where we provided 100 percent support for some of those organizations 20 years ago, now it’s only 5 percent—but we haven’t abandoned them.

Sometimes the impact of an organization is so broad that it’s really difficult to unbundle and say we want Program A and not Program B, C, D, and E. There are about 20 organizations that get unrestricted support from us either because their missions are so broad or because we helped start them up.

Weinberg: Sometimes grantees write to us and say, “We’d like to add two new staff people to do this and that.” Really, what they want is an increased general operating budget. So we won’t make a restricted grant for those specific staff people, but if we like everything else about the organization then we may make a general operating grant.

Sometimes we get a request for a general operating grant from an organization that has ten programs, and only three programs are relevant to our mission. In that case we’ll support those three programs, including a portion of the overhead (assuming we’ve looked at the organization as a whole and feel that its overhead is appropriate).

Bird: We’ve found that many organizations just don’t know how to account for their overhead properly. In those cases, we will throw in extra money and say, “You haven’t accounted for any overhead here, you haven’t accounted for the driver or the insurance,” as Wendy was saying, so we take the initiative to do that.

Thoman: Do you give multiyear general operating grants?

Garen: We do. If the recipient is just going to come back in 12 months, it’s simpler for both of us to fund more than one year. Typically we don’t go beyond two years, but this longer payout is helping to stabilize the sector.

Weinberg: If the organization is new to us, we’ll test it with a one-year grant. If it’s an organization known to us, or has a reputation that makes us feel comfortable, we’re more likely to give a two- or three-year grant. We have a provision in our contracts that if we’re at any point dissatisfied after the first year, we reserve the right to cancel or modify the grant.

Garen: When we’re supporting overhead and making general grants to an organization, it’s usually because we know them thoroughly, have reviewed their financials, have met their leadership, and have seen them work on their own turf.

Bird: Each year we invite every Nashville nonprofit to ask us for technology money. We end up making about 100 grants a year of a few thousand dollars each. Those grants not only help agencies keep up with their tech needs, but they also give us a doorway into who they are, how they operate, and if they can be trusted. I’ve found that incremental kind of trust-building to be helpful. Those relationships grow over time. And it’s hard to trust an organization with a big grant if you haven’t first trusted it with a little one.

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